Energy efficiency and fuel poverty - Environment, Food and Rural Affairs Committee Contents


Examination of Witnesses (Questions 180-197)

MR JIM MCDONALD, MR ALAN SMITH AND MR GEAROID LANE

10 DECEMBER 2008

  Q180  Mr Drew: If government was to come to you and say we know that the problem of this whole area of energy efficiency, fuel poverty and climate change reduction is too complex. We have our schemes, you have your schemes, let us cut through all this and do things on an area-based basis, has that happened? Should it happen and, if it did happen, how would you respond?

  Mr McDonald: It is a very fair question. Again I would come back and, if I put myself in the customer's shoes, as a customer what I would expect is everyone making the opportunity to involve me in any way that I can move out of fuel poverty or indeed improve the energy efficiency of my housing from that. Any opportunity that we have to target down in a community-based principle or indeed in a wider and local authority-based principle and utilise the information that exists in that community or that local authority to better target the efforts can only be beneficial for all of us.

  Mr Lane: Both area-based schemes and company to individual schemes have their place. I would not like to say one is good and one is bad. The value of being able to deal with the whole area, we have touched on being able to go deeper and do whole household community approaches. That works particularly well in certain circumstances but it is an expensive approach and delivering a single cavity wall solution to a single householder who has put up their hand and said "I want to make my house better insulated, what can you do for me" will always have a valuable place. We would lose a lot if we chucked everything out and said let us only go for an area-based approach. Both have their place.

  Mr Smith: I do not have anything to add over and above that.

  Q181  Dr Strang: I think the Committee is bound to accept the government's definition of fuel poverty at 10%. You said, Mr Lane, you have to be concerned about the numerator as well as the denominator. It is fair to say that Centrica, and perhaps other companies, have been trying to work closely with the DWP and the aim is to try and look very closely at this individual household income cost of fuel. On the question of ignorance as to how much fuel we are using, whether gas or electricity, first of all real-time displays, as you know it has been suggested let us get these in quickly and let people have a better understanding. I have to say I am sure this applies to a high percentage of households in my constituency even if they are relatively affluent, dare I say like a Member of Parliament's house, or like low paid people I represent, that in fact if they could be better informed as to exactly how much they are consuming vis-a"-vis the TV or the central heating, if they are lucky to have it, or whatever. I would like a response on that. On the smart metering programme, which the government is fully committed to, we have evidence, which we also accepted, that it may take two years to plan this thing, and we can probe that. A 10 year roll-out does seem, given the enormity of this issue, if you took it to poor constituents living in poor property often with not much money in the house, surely there has to be something more targeted and more effective to move forward, working of course with the companies and the DWP and the local authority or the housing authority.

  Mr McDonald: I would be happy to pick it up if I may. There are two separate issues and I will cover them separately. In terms of the hand-held device, we had a proposition last year that went out to 150,000 offering free hand-held devices.

  Q182  Lynne Jones: Is that under CERT?

  Mr McDonald: It was not; it was a separate proposition entirely. It was an energy saving campaign linked to a specific website. I probably do not have the time to go into that and I apologise. The key point is ensuring that the customer is engaged and wants to save energy in the first place. What we absolutely found is that to do a blanket distribution of these units would not help, and on the feedback we have had on the 150,000 it does not. The key point is if you can engage the customer that would bring you onto the smart meters as well which is fundamental. I think any help you can give to reduce that planning process I think smart meters are the right thing for an industry to do. They are helpful to customers and we have spent £12 million in consultation with Ofgem on smart meter trialling. Certainly the results we have found on that, linking smart meters and the hand-held device, I think people are far more aware of what they are using and if people are more aware of what they are using they are more engaged to use less of it and therefore move forward. I would stress I think the smart meter delivery is far more important than the hand held device.

  Q183  Dr Strang: David was implying when talking about joining it up that the retailer or the supplier is at the sharp end and maybe you are the people who should be really giving the lead and getting in there and working with our consumers. Is that a fair observation? That may be the government's policy.

  Mr McDonald: Could I give a quick reply on a project that we have going on at the moment, which has already been mentioned in the House, on Kettering Borough Council. We are introducing smart meters into a number of customers' homes and Kettering Borough Council will give a rebate to those customers who actually achieve an energy efficiency target. That sort of working together between local authorities and energy suppliers from that point of view can make a difference and speed up implementation and make sure that people are engaged in the process as well.

  Q184  David Taylor: Can we finish off on data sharing? Gavin mentioned information from the DWP. Against a backdrop where we have seen in recent months data disks lost in the post with the details of tens of millions of families on, we have seen memory sticks with At Risk children's addresses on left in cars, we have seen defence information left on the train at Teddington no doubt the plans to invade Tehran, or whatever it might be, or other sensitive data of that kind, and of course the newspapers react with a range of headlines from the synthetic to the splenetic, the electorate are pretty sceptical about the public sector's, as they see it, ability to keep data secure. Is the private sector any better? If we were starting to share data on a grander scale, and I guess your sins and errors will not hit the press in the same way as the government's will, are you any better? Can we trust you with data and can you trust us?

  Mr Lane: To re-wind to the principle of data sharing just to say in starting that we think it is vitally important and that targeting the people who are in most need of the help has been a perennial problem. Despite trying to work with multiple agencies it is still a problem so the moves towards data sharing are very, very important. In terms of the proposed modus operandi for that, the proposal is not to hand over disks with loads and loads of data to companies in the utility sector and have them do mail-outs. The proposal is to use a third party agency that is very, very experienced in dealing with secure information as an intermediary which would handle the data on behalf of both government and the energy sector but, having said that, data security is vitally important in any data sharing exercise.

  Q185  David Taylor: All government ministers say that. All MDs of private sector companies say that. The person observing the debate, all they can say is the Mandy Rice-Davies comment "They would say that wouldn't they." Do they deliver on it? It is not at all clear that people's data is being held or transmitted in a secure way, is it?

  Mr Lane: All I can say, and I am not an IT expert, is the proposal is not for the energy companies to hold that data themselves and it will be handled by an expert agency. The benefits of being able to target the people who need it most are very important so we should try to deal with those problems and find security solutions rather than say because of fears of data security we should abandon the whole very valuable exercise of data sharing.

  Q186  David Taylor: It should not be sensitive and vulnerable to exchange data about properties, should it?

  Mr McDonald: I do not think it should be. I have two pleas if I may: one, let us not bite off more than we can chew and let us keep it to a sensible amount of data. Let us ensure the process of transfer works and let us ensure that the security element works before we widen anywhere beyond that. That would be my plea number one. The second thing would be if we actually had customers sitting here right now who could benefit from this I think they would be looking at us and saying "Guys, just fix it." Come up with a solution, target appropriately from that point of view and let us get on and do it. Those would be my two elements.

  Q187  Miss McIntosh: Mr McDonald, you mentioned in the longer term owner occupiers should be responsible for their choice of housing, and presumably within that energy efficiency and heating. What about tenants because they tend to live in the poorer housing?

  Mr McDonald: I think that is a big issue even including within CERT. It is very easy to make contact with the customer who is actually using the energy, either gas or electricity but it is much more different to get to the tenant from that. It is always, being honest about it, less beneficial to the tenant than it is actually to the people who are in there. There is work that has to be done around there and we all have a part to play in it. I do not have an answer for it today but I do think it is something we should focus down on because we are not going to improve the quality of housing within the UK unless we do find a better way to get to them. It is something we are working on at the moment but I do not know what the answer is.

  Q188  Miss McIntosh: What elements in the supplier obligation post-2011 would you particularly like to see?

  Mr Lane: On the private tenanted sector it is a huge problem. Beyond the targeting it is also about whether it is the interests of the tenant or within the means of the tenant to do these things to the house if they do not have long-term security of tenure. The move to display energy certificates so that landlords have to provide at least that information to would-be tenants will be valuable. With increased focus on energy prices and on energy costs, it is likely that would-be tenants will put two properties that they might be interested in renting side by side and say "This one is A rated and this is F rated. Let us go for the A rated one." That will not be enough and we need to look more and more at how we can use sticks as well as carrots to get landlords to act on properties.

  Q189  Miss McIntosh: If the supplier obligation was significantly different to CERT, how can you learn from CERT about tackling fuel poverty within such utility-led programmes? What can we learn from CERT?

  Mr Smith: I thought we had already covered that.

  Q190  Miss McIntosh: The supplier obligation you are very happy with? You do not think the supplier obligation will be entirely different to CERT.

  Mr Smith: I think it will be different to CERT. This is the point we raised earlier on, going from an input-based approach towards a more output-based approach.

  Q191  Miss McIntosh: Micro-generation, looking ahead to that, how do you think that can be given a greater role in reducing fuel poverty?

  Mr McDonald: I have to say the flex scheme that exists within CERT is an extremely good move forward. We have recently installed our first 10 ground source heat pumps under that particular programme and I think that certainly helps. We have about 1,000 ground source heat pumps installed throughout the UK now. The difficulty will be if we do not tackle the targeting of specific houses in specific areas it can do, micro-generation, particularly ground source heat pumps, is not something you do in one house; it has to be in a row of houses and you have to get the agreement of the tenants or the owners as such to that. We have been fortunate in being able to trial some of those schemes and move it forward.

  Q192  Chairman: How do you make it pay? Ground source heat pumps are £3,500 to £4,000 a time.

  Mr McDonald: You have hit the nail on the head. The priority flex element within CERT, which allows a 270% uplift if you are actually replacing a non-mains gas situation or heating situation, allows you to get that out particularly if it is in the vulnerable category. It is a move in the right direction but there is certainly more that can be done off the back of that. The key point is, and you are right, and this applies to solar photovoltaics, et cetera, the pay back on those to the majority of the population is just too far away at this point in time.

  Q193  Miss McIntosh: Presumably with new build, the same as they are doing with these houses we have seen in Wembley where they are putting the new waste in, what I do not understand is they have been doing this in Scandinavia for years, taking energy from waste projects and combined heat and power schemes and putting industrial and household waste plants next door to new developments, but I presume it is only economic to do it with new developments and difficult to do with existing.

  Mr McDonald: I am not the person to give an exact answer on that but it is important to work with house builders to help them achieve the zero emission element of new housing at the appropriate time from that. We have started that work with Barratts. We have it fairly well established in 10 different areas with about 1,000 houses so there is a part for all of us to play in that.

  Mr Lane: A thought on the economics. It is an important thing to note that the CERT scheme, and what would follow CERT, is primarily around delivering energy efficiency and carbon savings and a response to fuel poverty. The support for renewable technologies is not just given on the grounds of carbon savings. You have to remember that there are four reasons why we support renewables. It is about carbon but it is about security and diversity of supply, about supporting new technologies to come done the cost curve and it is about UK plc jobs and intellectual property. Any support mechanism that tried to stimulate a widespread mainstream market for micro-generation just on the basis of the carbon price will not deliver enough support and that is why the enabling legislation in the Energy Act to support feed-in tariffs and renewable heat incentives is vitally important. We just now have to crack on, turning that enabling legislation into a support mechanism. In the meantime we are using things like the low carbon buildings programme phase 2, CERT uplifts where possible and new build to find niche markets. If we want to have the dramatic transformational effect, like we had back in the 60s and 70s when British Gas converted 34 million appliances to run on natural gas, we need a proper support mechanism that is fit for purpose and that is where RHI and feed-in tariffs come in.

  Q194  Lynne Jones: On feed-in tariffs, the current proposals limit the amount of energy that can be generated by a community to I think it is 3 gigawatts, possibly now going up to 5 gigawatts. What is the energy company's view on that, because most of the renewable energy NGOs believe that is too low and it should be at least 10 gigawatts?

  Mr Lane: It was a move from 3 megawatts to 5 megawatts of installed capacity as a delineation. The discussion was around whether we would be unnecessarily limiting certain schemes from happening by setting the cap too low, on the one hand, versus, on the other hand, if we allowed very big schemes to go through and be supported under the feed-in tariff and whether we would get interference between the two support mechanisms of the feed-in tariff and the renewables obligation.

  Q195  Lynne Jones: It might eat into energy companies' profits too much.

  Mr Lane: Not at all. Any place where there is complexity and confusion as to which is the right support mechanism that applies you will find that you could stymie the market and create uncertainty which does not necessarily have to be there. I do not think it is all that important exactly where we set the cap as long as we know where the cap is and then there is no confusion as to which policy support mechanism you apply for. If you look at the size of schemes to be done even for fairly large community schemes you are generally talking of hundreds of kilowatts or a very small number of megawatts at best.

  Q196  Lynne Jones: At the moment.

  Mr Smith: There is also a subtle difference between a feed-in tariff and the renewables obligation, in that the renewables obligation is a premium payment and the feed-in tariff is effectively a subsidy so you are guaranteed getting that money. With the other one you are exposed more to the market. As Mr Lane says, it is less of a concern now whether it is 3 or 5 megawatts but there ought to be a cut-off.

  Q197  Lynne Jones: Would 10 be a problem?

  Mr Smith: If anybody is making an investment on a renewable scheme and it is in the scale of megawatts, then they should be very capable of working within the renewables obligation as opposed to getting the guaranteed subsidy. I think 5 is a figure that the industry has got itself comfortable with and I do not think there is a case for it to be raised higher.

  Chairman: We will draw stumps at this stage. Thank you for answering our questions and for your written submissions. There are one or two things where you very kindly said you would write to us again. If upon reflection there is anything more you would like to write to us about, we are always glad to hear from you. The only thing that cannot be undone is that which is on the record that you have said. Thank you.





 
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